Today - Tuesday, September 30, 2014
- Dow Chemical's (DOW -1.6%) bid to throw out a $1.06B price-fixing verdict imposed after customers accused it of conspiring to artificially inflate polyurethane prices is rejected by a U.S. appeals court, which says there is enough evidence to support the class action award.
- The 10th U.S. Circuit Court of Appeals in Denver says new U.S. Supreme Court limits on class actions do not require Dow customers to sue individually, even if some could have avoided price hikes by negotiating or using rival products.
- Dow says it is disappointed in the decision and will appeal, including to the Supreme Court if necessary.
- U.S. oil exports hit a 57-year high in July, averaging 401K bbl/day and up from 396K bbl/day in June and nearly quadruple the 104K exported in July last year, according to the Energy Information Administration.
- It was the second month in a row that exports were the highest since March 1957, according to EIA data going back to 1920.
- Most of July's crude-oil exports (373K bbl/day) went to Canada, while 14K bbl/day were exported to Italy, 12K went to Switzerland and 3K to Singapore; the exports to Italy, Switzerland and Singapore were shipments of foreign oil that had previously been imported to the U.S.
- U.S. oil imports have fallen as domestic production has climbed: The U.S. imported 7.6M bbl/day of crude oil in July, down from 8.1M a year ago, the EIA says.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, CRUD, USL, UWTI, DNO, DWTI, SZO, OLO, OLEM
- Russia's Mechel (MTL +42.1%) is close to a compromise deal with its creditors that could resolve its debt problems within two weeks, according to an economic adviser at the Kremlin, sends shares skyrocketing.
- MTL borrowed heavily before the financial crisis, and creditors have pushed for a repayment rather than restructuring of its $8.7B in net debt; Russian leaders had said bankruptcy was “a probable scenario” instead of restructuring.
- Freeport McMoRan (FCX +0.2%) is upgraded to Buy from Neutral with a $40 price target at BofA/Merrill, which believes upside for the shares more than offsets the risk associated with the ongoing contract negotiations with the government of Indonesia.
- The firm views FCX as a compelling risk-reward profile due to the company's improving free cash flow profile, expected copper sales growth of 35% over the next three years resulting in EBITDA growth of 80%, best in class operating execution, world class brownfield expansions with below average development costs, and a high dividend yield.
- The early decline in WTI crude oil has accelerated sharply over the past few minutes, and it's now off 3.5% to $91.25 per barrel, about inline with the lowest pricing seen this year. USO -2.9%
- Moving alongside is heating oil (UHN -1.1%) and gasoline (UGA -3.1%).
- Broad energy ETFs: DBE, RJN, JJE, ONG, RGRE, UBN
- Checking other commodities: Silver (NYSEARCA:SLV) is down 3.4%, Copper (NYSEARCA:JJC) is lower by 1.3%, and Wheat (NYSEARCA:WEAT) is off 1.8%.
- Broad commodity ETFs: DBC, DJP, GSG, RJI, GCC, USCI, GSC, GSP, RGRC, DJCI, LSC, FTGC, DEE, UCI, DYY, CMD, BCM, DDP, UCD, CMDT, SBV, DPU, CSCB, CSCR
- Century Aluminum (CENX +9.9%) is upgraded to Buy from Neutral with a $30 price target, up from $21, at BofA/Merrill, which revises its outlook upon taking a more positive stance on global aluminum markets.
- BofA believes the recent retreat in the stock offers an attractive entry point, and it expects earnings to be revised up near term on mark-to-market aluminum price recovery.
- The firm expects CENX to swing to $212M net cash as of year-end 2015 from $63M net debt as of year-end 2014, and sees recently trimmed power costs at its Sebree and Hawesville smelters boosting earnings.
- BofA also upgraded Alcoa (AA +1.9%) today.
- Fortuna Silver Mines (FSM +1.5%) says it has increased silver in reserves by 26% and silver in inferred resources by 67% at its San Jose Mine in Mexico.
- FSM says reserves were reported for the Trinidad North discovery area for the first time, confirming the potential of the northern extension of the Trinidad deposit, and the open exploration potential to the north and to depth bode well for the future of the San Jose Mine.
- Mosaic (MOS -2.1%) opens lower after saying it is reducing phosphate fertilizer production because of high sulfur and ammonia prices.
- MOS says the curtailment will result in lower operating rates at its mines and concentrates plants but does not expect any employee layoffs.
- MOS also says it expects Q3 potash and phosphate sales volumes to be at or near the lower end of previous guidance, due to weather-driven production outages in potash and by timing of shipments in phosphates; prices are expected to remain near the middle of guidance.
- POT -1.1%, AGU -0.9%, CF -0.2%, RNF -0.8%, RTK -1.7%.
- Schnitzer Steel (NASDAQ:SCHN) says it expects Q4 adjusted EPS from continuing operations of $0.28-$0.32 vs. $0.16 in the year-ago quarter and analyst consensus estimate of $0.20.
- SCHN expects its metals recycling business to generate Q4 operating income of $13-$14 per ton, the highest quarterly performance since 2012, due to productivity and cost reduction initiatives, combined with higher sales volumes sequentially and less market price volatility.
- Sees operating income in its steel manufacturing business of $8M-$9M, the highest quarterly operating income since 2008, citing accelerating demand from west coast construction markets.
- SCHN +1.6% premarket.
- Consumer prices in September are up just 0.3% from a year ago, down from 0.4% a month previous, putting the inflation rate below 1% for twelve straight months. The ECB's target inflation rate is 2% and Mario Draghi has threatened to unleash more stimulus, perhaps QE, if inflation doesn't behave and go higher.
- The euro sets more multi-year lows, slipping 0.75% to $1.2594.
- FXE -0.75% premarket
- The strong dollar is a good enough excuse to continue selling gold, which is off 0.9% to $1,207 per ounce, roughly the low point of the year.
- GLD -0.8% premarket
- Newmont Mining (NYSE:NEM) exported 30K metric tons of copper concentrate from Indonesia yesterday, ending a nine-month hiatus and highlighting a ramp up in copper mine supply that is expected to tip the market into surplus this year.
- The country's largest producer, Freeport McMoRan (NYSE:FCX), resumed shipments in early August while saying it had built up a 140K metric ton stockpile and expecting total copper concentrate production to reach 1.8M metric tons this year.
- As a result of boom time investment, new global mine supply is feeding into the market and is expected to result in a surplus, weighted towards the end of the year.
- Alcoa (NYSE:AA) is upgraded to Buy from Neutral with an $18 price target, up from $16, at BofA/Merrill Lynch, which cites a better cash flow outlook, improved aluminum fundamentals and other positive catalysts.
- Alcoa is moving past much of the costs related to closing high-cost operations, and associated pension costs are expected to fall nearly $100M Y/Y, so BofA now estimates free cash flow of $986B in 2015 and $1.3B in 2016 from an expected $288M in 2014 and $385M in 2013.
- AA +1.2% premarket.
- Molycorp (NYSE:MCP) +2.4% premarket on news that its expanded leach system has been placed into service at its Mountain Pass, Calif., facility.
- MCP says the system expansion addresses one of the major production bottlenecks at Mountain Pass and is expected to boost rare earth production and lower operating costs once it is fully operational and sufficient supplies of hydrochloric acid are available.
- While onsite production and market availability of HCl are expected to improve in Q4 and beyond, Q3 2014 rare earth production at Mountain Pass is not expected to exceed Q1 2014 levels.
Monday, September 29, 2014
- BHP Billiton (BHP -1.1%) has sent its top project manager to run the Jansen potash development in western Canada, a move the potash market will scrutinize for clues to BHP's plans for its Canadian mine.
- If Jansen were to begin producing today, experts say it would increase global potash supply by nearly 15%, which would worsen an oversupply problem for the fertilizer ingredient.
- BHP already has committed ~$3.8B to a project it says has no fixed completion date, but analysts aren't expecting anything before 2020.
- Copper mining has been suspended all weekend at Freeport McMoRan's (NYSE:FCX) Grasberg mine in Indonesia after four workers were killed and five others were injured when a car collided with a mining truck.
- FCX so far is unable to give any estimates on the impact to overall production.
- It is the second fatal accident this month at the mine; a boulder fell and killed a worker underground earlier this month.
- FCX -1.3% premarket.
Friday, September 26, 2014
- Vale (NYSE:VALE) reaches a deal to expand its fleet of extremely large ships for carrying iron ore, following a truce with China’s largest shipping company that is expected to allow the vessels to dock at Chinese ports.
- Cosco, China's largest shipping group, had lobbied against the Valemax ships having access to Chinese ports, but Vale is agreeing to transfer ownership of four of the vessels to the Chinese company, which will commission the building of a further 10 vessels.
- Vale, unable to dock its large ore fleet at Chinese ports, has been forced to transfer ore to smaller ships at ports including Subic Bay in the Philippines.
- Monsanto's (NYSE:MON) unapproved genetically engineered wheat has been found growing in Montana, a year after discovery of the GMO wheat disrupted U.S. wheat exports when it was found at an Oregon farm.
- Investigators today closed a probe into last year's incident in which regulators say they cannot explain how the plants escaped field trials that ended eight years ago.
- The latest case should not affect trade since the rogue wheat was found on a non-commercial farm and the USDA found none in commerce.
- Yara International (OTCPK:YARIY) is again hunting for a new leader after Norsk Hydro (OTCQX:NHYDY) CEO Svein Richard Brandtzaeg reverses his decision to take the top job, partly due to Yara's merger talks with CF Industries that could create the world’s largest fertilizer supplier.
- Brandtzaeg felt Yara breached its contract because he agreed to join the company July 18 but was not aware of the CF talks until he was informed Sept. 9, according to a Norsk Hydro spokesperson.
- Cliffs Natural Resources (NYSE:CLF) is attracting interest for its Australian mines from domestic producers including Mineral Resources and Mount Gibson Iron, Bloomberg reports.
- The Australian companies are said to be weighing bids for the iron ore mines in Western Australia state that may be valued at as much as A$1B ($880M).
- CLF produces iron ore from the Koolyanobbing complex ~230 miles northeast of Perth; the mines produced ~5.5M tons of iron ore in the six months to June 30.
Thursday, September 25, 2014
- Titanium suppliers Allegheny Technologies (NYSE:ATI), Precision Castparts (NYSE:PCP) and RTI International Metals (NYSE:RTI) should benefit near and long term from supply chain de-risking in response to geopolitical instability in Russia, Credit Suisse says, seeing a secular positive through the cycle for titanium producers.
- New platforms from Boeing and Airbus are expected to be 12%-16% titanium by purchase weight compared to high single-digits in current gen platforms, which the firm says could result in as much as 50% growth in titanium consumption in aerospace over the next five years.
- The report didn't help shares today: ATI -4.8%, PCP -1.2%, RTI -2.6%.