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Forget Asia? We've got a guest on Commodities tomorrow at 11.50 a.m. ET who says Mexico is set to become a huge export market for U.S. natural gas.
David Forest is managing director of Vancouver resource investment advisor Notela Resource Advisors Ltd. and the author of Pierce Points, a free weekly e-letter on commodities.
In a guest post on Zerohedge.com last week, he said Mexican imports of U.S. gas have almost doubled since 2008 "and with export capacity projected to grow to over 7 billion cubic feet per day (Bcf/d), Mexico could start taking 10 percent of U.S. production - in a very short time frame, with very low capital costs compared to the LNG boom unfolding."
But isn't Mexico a huge energy producer in its own right?
Between 1990 and 2008, Forest writes, national oil and gas company Petroleos Mexicanos, or Pemex, stepped up its gas production. But when prices collapsed in 2008, the government decided to satisfy domestic demand by importing now-cheap gas.
But Mexican gas consumption across the country has jumped as power generators switched from oil to gas. "Mexico's natural gas supply-demand balance is-for the first-time ever-near deficit," Forest writes. "Current gas usage amounts to nearly 6.5 Bcf/d, and Pemex is now producing less than that."
He says this could be huge for natural gas prices. "All in, Mexico could create an extra 5 bcf/d demand in the coming three years. As context, an extra 5 bcf/d demand from the power sector in 2012 sent natural gas prices doubling in the U.S. from $2 to $4/mcf in one year."
If there's time, we'll explore another couple of themes with Forest. For example, he says, a growing premium for platinum (trading at $1,360 an ounce on Monday) over gold ($1,236 an ounce) appears to be have been caused in part by determined marketing of platinum by jewellers. Meanwhile, he says, as the South African mining sector reels, "a supply crunch looms for platinum group elements."
Finally, Forest also says there are signs of strength in the steel industry, including a 50% jump in South Korea's molybdenum imports in 2013. The metal is used in high-quality steel alloys.
"Could be a blip in a down-trend," Forest says, "but it sure doesn't look like the moves of an industry that's down and out."
Which leads us nicely to our 11.40 a.m. guest: Axiom Capital analyst Gordon Johnson, who will take us through the gyrations in U.S. steel prices.
The Wall Street Journal reported last week that after sliding for six months amid excess capacity, prices have risen 10 percent in recent weeks to the highest since early January. It cited blast furnace outages in Ohio and Brazil and a three-month lockout at U.S. Steel's plant in Lake Erie, Ontario, where management and labour can't agree on a contract. Those factors have taken five-million tons of capacity or 4 percent of U.S. supply, off the market.
For steel buyers, it's a nightmare. They fear getting stuck with over-priced inventory that they have to sell at a loss if prices fall again.
"For now," Steel Market Update publisher John Packard told the WSJ, "oversupply doesn't exist any more in the U.S."